An INNOVATION POST-IT — How to Raise Funds without Going I.P.O.

Getting listed via Initial Public Offering (I.P.O.) is a conventional way to raise funds for the matured company.

What if our company doesn’t qualify for listing?

Start-ups and growth companies have an insatiable appetite for funding. It was reported that every start-up in its initial stages require at least $3,000.00 from Day 1. The purpose of the initial funding could vary. Some are for working tools subscription such as Zoom communications, Calendly, Linked Premium; other purposes could be labour related such as maintaining a team of Virtual Assistants overseas.

All Start-ups face the same issue.

They have to find their way towards financial viability before a complete depletion of their cash reserves.

From my experience, there are 3 other notable ways to raise funds for the growing business apart from selling equity stake by going through the I.P.O. route.

The Sales Revenue Route

Just One Man’s Opinion — This is the best route for any business.

In a way this is organic, it also demonstrates the viability of the business model. When I first started my coaching business, I made a point not inject any personal funds into the business. I wanted to prove this model works as a side-gig before taking that Leap of Faith.

I was still holding my full-time job as a Business Analyst then.

When I had to leave my job due to office politics, my coaching side-line is grown from $100 per hour to $200+ per hour. It has given me a strong jab of confidence knowing that I will be able to survive (by minimalist standards!) without a full-time job and I can grow this business in the midst of the Global Pandemic.

The business pressure to hit higher revenue targets has nothing to do with external parties.

I do not lose any money through equity injection or incur further debt due to borrowings.

The best part?

Done correctly, the entire business could be organically self-financing.

The Borrowing Path

It has to do with that 4-letter word — Debt.

Or 10 letters — Borrowings.

The choice is yours.

The key thing to note here — Debt is like an aphrodisiac. The nature of debt is it allows us to consume today while paying for it in the future. If you understand what credit cards is about, you will know what I mean.

Used correctly, debt can be a great tool.

How?

It has to be deployed for productive means.

Borrowings are typically incurred for recurring expenses such and General and Administration costs, rental and utilities. That is because the upfront capital outlay is larger upfront compared to the subsequent variable expenses incurred.

Most entrepreneurs I know who utilises debt as a working capital tool has a strong Sales revenue model.

They work to ensure that their Revenue is sufficient to cover their debt service.

You should consider that too.

The Sell-Your-Stake Track

Yup, we can still sell our stake in the company.

While a mature companies might be eligible to go public listing, they can seek out Angel investors or Venture Capitalists for that financial boost as required.

Most notable examples are Entrepreneurs who appear on Shark Tank or Dragon’s Den to seek funding. Entrepreneurs who has worked hard to get their businesses to become cash-flow positive coupled with strong Sales revenue year-on-year gets their deal done.

Tough luck for the others.

However, we have to note the practicality of having a financial business partner. They will have a say in the way the businesses are run from now on. That means having to apportion some control over to the funding partner.

And they, could have a wildly different idea in terms of the strategic direction ahead.

As mentioned, there are many more avenues to raise funds for our ever-growing business.

While the best way is the organic route via Sales Revenue as we do not cede our control to others — It is also dependent on the stage that our businesses are in.

If our businesses are at maximum capacity and scalability is the next logical step to take our business to the next level, then why not?

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About the Author:

As a Consultant by training, I believe in making the complex simple.

Because simplicity adds value.

Simplicity helps us gain clarity, and clarity helps us to grow.

And if we are not growing, then what’s the point of anything else?

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